What’s Wrong With Health Insurance?

Every time my family’s home or auto insurance comes up for renewal, I am reminded of how disjointed that other major form of insurance – health insurance – remains in comparison.  Probably like you, my wife and I review our home and auto renewal offer to make sure our premium reflects the discounts we should have earned – protective alarms in our home, safe driving records, claim free histories, etc.  These discounts are, of course, not just marketing ploys but a reflection of authentic actuarial equivalents of cost drivers.  Insurance companies base my insurance risk, and my relative premium cost, on my actual behavior.
Not so with health care.
Our system of employer-sponsored health care is a sharp contrast to every other major form of insurance.  It’s the only major system of insurance where your individual behavior gets a pass.  Meanwhile, 50%+ of total health care costs are driven by avoidable individual unhealthy choices.  Can employers continue to subsidize smoking, sedentary lifestyles, poor eating habits and non-compliance with chronic condition treatment plans?  Should those individuals making healthy choices continue to pay for the unhealthy choices of their co-workers?
When people ask me why I believe so ardently the financing of health care needs to be restructured, I often use the example of another employer-based benefit we all rely on as an important safety net – the retirement framework of 401(k) investing.  Can you imagine what would happen if our 401(k) system was structured similar to the way health plans are currently?  Imagine if employees were encouraged to carefully plan their retirement savings needs, evaluate their individual risk tolerance, research funds and contribute a percentage of their income throughout the year only to have their employer re-distribute all the invested dollars evenly among all employees at the end of the year, regardless of the number of dollars or work each employee contributed.  If 401(k) investing was simply on the “honor system”, what motivation would anyone have to contribute to an employer-structured retirement savings plan at all?
That’s the crux of the health care dilemma – the current structure provides little motivation for individuals to make healthier choices.  There’s little or no direct relationship of healthy behavior to individual cost.  It’s not equitable, not motivating.
The good news is more employers are beginning to see the value of changing this problem – the value (and reward) of a healthier alignment of behavior to individual cost.  Also helpful, the finalized health care reform legislation makes it even more affordable for employers to incentivize healthy behavior.  To maximize success, employers will benefit from providing their employees the personalized support needed and the social elements that encourage sustained lifestyle changes.
None of us look forward to receiving our annual insurance premium bills in the mail.  But won’t it be satisfying when our individual “premium” for health care finally factors in and rewards us for the positive steps we achieve for taking better care of our health?
- Kyle Rolfing, CEO, RedBrick Health. Speaking at The Conference Board Employee Health Care Seminars with Hess Corporation on September 28 in New York and October 26 in Chicago.